“NO ES SUFICIENTE” — It’s not enough. That was the message protest leaders in Ecuador delivered last week to the country’s president after he said he would cut the price of both gas and diesel by 10 cents in response to riotous demonstrations over rising fuel and food prices.
The anger and fear over the energy prices that have exploded in Ecuador is playing out all over the world. In the United States, average gasoline prices, which have risen to $5 a gallon, are taxing consumers and forcing President Biden into an excruciating political calculation ahead of this fall’s midterm congressional elections.
But in many places the jump in fuel costs was much more dramatic, and the resulting misery much more acute.
Families worry about keeping the lights on, filling the car’s gas tank, heating their homes and cooking their food. Companies are grappling with rising throughput and operating costs, as well as demands for wage increases from their employees.
In Nigeria, stylists use their cell phone light to cut hair because they can’t find affordable fuel for the gas generator. In Britain it costs $125 to fill the tank of an average family car. Hungary prohibits motorists from buying more than 50 liters of petrol per day at most petrol stations. Last Tuesday, police in Ghana fired tear gas and rubber bullets at protesters protesting economic hardship caused by gas price hikes, inflation and a new tax on electronic payments.
The staggering rise in the price of fuel has the potential to rewire economic, political and social relations around the world. High energy costs are cascading, fueling inflation, forcing central banks to raise interest rates, curbing economic growth and hindering efforts to combat devastating climate change.
The invasion of Ukraine by Russia, the largest exporter of oil and gas to world markets, and the retaliatory sanctions that have followed, have caused gas and oil prices to rise with astonishing ferocity. The unfolding disaster comes on top of two years of upheaval caused by the Covid-19 pandemic, occasional shutdowns and supply chains.
The spike in energy prices was a major reason why the World Bank revised its economic forecast last month, estimating that global growth will slow even more than expected this year, to 2.9 percent, about half of what it was in 2021. The bank’s president, David Malpass, warned that “a recession will be hard to avoid for many countries.”
In Europe, over-reliance on Russian oil and natural gas has made the continent particularly vulnerable to high prices and shortages. In recent weeks, Russia has accelerated gas deliveries to several European countries.
Across the continent, countries are drafting emergency rationing blueprints that include sales restrictions, reduced speed limits and lowered thermostats.
As is usually the case in crises, the poorest and most vulnerable will suffer the most. The International Energy Agency warned last month that higher energy prices have left 90 million people in Asia and Africa without access to electricity.
Expensive energy radiates pain, contributes to high food prices, lowers living standards and exposes millions of people to hunger. Higher transportation costs increase the price of any item transported, shipped, or flown — be it a shoe, cell phone, football, or prescription drug.
Understanding inflation and how it affects you
“The simultaneous rise in energy and food prices is a double blow to the poor in practically every country,” said Eswar Prasad, an economist at Cornell University, “and could have devastating consequences in some corners of the world if it continues. for a longer period of time.”
Livelihoods are already being turned upside down in many places.
Dione Dayola, 49, leads a consortium of about 100 drivers cruising through the metropolis of Manila, picking up passengers in the minibuses known as jeepneys. Now there are only 32 of those drivers on the road. The rest have left to look for other work or have gone begging.
Before pump prices started to rise, Mr. Dayola said, he would take home about $15 a day. Now it’s down to $4. “How do you expect to live on that?” he said.
To increase the family income, Mr. Dayola’s wife Marichu sells food and other items on the street, he said, while his two sons sometimes wake up in the morning and spend about 15 hours a day in their jeepneys, hoping to earn more than them. spend.
The Philippines buys only a tiny amount of oil from Russia. But the reality is that it doesn’t really matter who you buy your oil from – the price is determined by the global market. Everyone is bidding against everyone and no country is isolated, not even the United States, the world’s second largest oil producer after Saudi Arabia.
Persistent expensive energy is fueling political discontent not only in places where the war in Ukraine seems distant or irrelevant, but also in countries opposing the Russian invasion.
Last month, Mr. Biden proposed suspending the small federal gas tax to reduce the $5 per gallon sting of gas. And Mr. Biden and other Group of 7 leaders last week discussed a price cap for Russian exported oil, a move designed to ease the burden of painful inflation on consumers and boost export revenues President Vladimir V. Putin has. Reduce. use to wage war.
Price increases are everywhere. In Laos, according to GlobalPetrolPrices.com, gas is now over $7 a gallon; in New Zealand it is over $8; in Denmark it is over $9; and in Hong Kong it’s over $10 for every gallon.
Leaders of three French energy companies have called for an “immediate, collective and massive” effort to reduce the country’s energy consumption, saying the combination of shortages and rising prices could threaten “social cohesion” next winter.
In poorer countries, the threat is greater as governments are torn between offering additional government support, which involves taking on heavy debt, and coping with severe turmoil.
In Ecuador, government gas subsidies were introduced in the 1970s, and every time officials tried to revoke them, there was a violent reaction.
The government spends about $3 billion a year to freeze the price of regular gas at $2.55 and the price of diesel at $1.90 a gallon.
On June 26, President Guillermo Lasso proposed cutting 10 cents from each of those prices, but the powerful Ecuadorian Confederation of Indigenous Nationalities, which has led two weeks of protests, rejected the plan, demanding cuts of 40 and 45 cents. On Thursday, the government agreed to cut each price by 15 cents, and the protests ended.
“We are poor and cannot afford our studies,” said María Yanmitaxi, 40, who traveled from a village near the Cotopaxi volcano to the capital Quito, where the Central State University is used to shelter hundreds of protesters. “Tractors need fuel,” she said. “Farmers need to be paid.”
The gas subsidies, which amount to nearly 2 percent of the country’s gross national product, are starving other sectors of the economy, according to Andrés Albuja, an economic analyst. Spending on health and education was recently cut by $1.8 billion to safeguard the country’s large debts.
Mexico’s president, Andrés Manuel López Obrador, uses the money the country makes from the crude oil it produces to subsidize domestic gas prices. But analysts warn that the revenue the government takes from oil cannot make up for the money it loses by temporarily cutting taxes on gas and providing additional subsidies to companies that operate gas stations.
In Nigeria, where the state’s public education and health care system is in a dire state and the state cannot provide electricity or basic security to its citizens, many people feel that the fuel subsidy is all the government is doing for them.
Kola Salami, owner of the Valentino Unisex Salon in the suburbs of Lagos, had to look for affordable fuel for the gas generator he needs to run his business. “If they stop subsidizing it,” he said, I don’t think we can even do that. …” His voice trailed off.
In South Africa, one of the most economically unequal countries in the world, rising fuel prices have created a new fault line.
As President Cyril Ramaphosa campaigns for re-election at the ruling African National Congress conference in December, even the party’s traditional allies have seized on the fuel costs as a failure of political leadership.
In June, after fuel reached an all-time high above $6 a gallon, the Congress of South African Trade Unions marched through Durban, a city already devastated by violence and looting last year and flooding this year. Higher fuel prices are “devastating,” said Sizwe Pamla, a union spokesman.
The dizzying spiral in gas and oil prices has led to increased investment in renewable energy sources such as wind, solar and low-emission hydrogen. But when clean energy gets an investment boost, so do fossil fuels.
Last month, China’s Prime Minister Li Keqiang called for increased coal production to avoid power outages amid a blistering heatwave in the country’s northern and central parts and a subsequent surge in air conditioning demand.
Meanwhile, in Germany, coal-fired power stations that were due to be retired are being re-fired to divert gas into storage stocks for the winter.
Little relief is in sight. “We will continue to see high and volatile energy prices for years to come,” said Fatih Birol, executive director of the International Energy Agency.
At the moment, the only scenario where fuel prices fall, Mr Birol said, is a global recession.
Reporting contributed by: Jose Maria Leon Cabrera from Ecuador, Lynsey Chutel from South Africa, Ben Ezeamalu from Nigeria, Jason Gutierrez from the Philippines, Oscar Lopez from Mexico and Ruth Maclean from Senegal.
